Ann: Daily share buy-back notice - Appendix 3E , page-8

re: Ann: Daily share buy-back notice - Append... Whatsnext I work in the finance industry and in the past few weeks I have had the displeasure of having to listen to some of the major fundies around. One thing relevant for FSA is that one fundy from either Perpetual or Schroders was discussing the banks and the recent NAB marketing campaign (breakup). His comments were that all the major banks are starting to lose money by writing new home loans (due to the major competition). His comment was that he would prefer for the banks to just not write any more loans at present. So the fact that FSA are clearly stating they are not aiming to build their loan book doesn't bother me that much at all. It is probably prudent. I would prefer for a company that I invest in to focus on where they can make money as opposed to not fairing well financially just for the sake of growing in size.

Again they have reduced their access to capital from Westpac (I think by $20M) but they still have the Bendigo $50M facility if need be. This change may have allowed them to utilise cash in other areas such as dividends or the renewed buy back.

Although I would love for FSA to significantly grow earnings or revenue but at present this doesn't look possible. However, they are starting to see good cash flow. When I think of FSA, I think of Telstra. By no means is FSA at the same quality as TLS. However, TLS hasn't grown revenue or EPS for the past 5 years. It is trading at a PE of 13 or 14 with a grossed up yield of around 10%. This market is after yield at present and fully franked divs, with steady earnings. FSA trade at a PE of 5 or 6 with a fully franked div of 8%. At present FSA have decided to use the additional cash flow to build EPS growth. If they are lucky enough to buy back another 12M shares they will probably have EPS of high 7c for this financial year. When they choose to stop buying back shares there is every possibility that they could pay at least 4 cents of dividend per share. Even with the share price at 60 cents that is a grossed up yield of around 10%. With the flow of funds into SMSFs and the drive for yield at present I still feel confident in a further increase in the FSA share price over the coming 2 years. If it does reach 60 cents I will be selling though.

Just my opinion. I feel happy that no one is interested in FSA at present. I see this changing over the coming couple of years.